Coach (COH) Marked As A Barbarian At The Gate

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Coach ( COH) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Coach as such a stock due to the following factors:

  • COH has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $200.7 million.
  • COH has traded 3.3 million shares today.
  • COH traded in a range 203.2% of the normal price range with a price range of $1.61.
  • COH traded above its daily resistance level (quality: 49 days, meaning that the stock is crossing a resistance level set by the last 49 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on COH:

Coach, Inc. designs and markets bags, accessories, business cases, footwear, wearables, jewelry, sunwear, travel bags, watches, and fragrances for women and men in the United States and internationally. The stock currently has a dividend yield of 3.9%. COH has a PE ratio of 11.3. Currently there are 6 analysts that rate Coach a buy, 3 analysts rate it a sell, and 14 rate it a hold.

The average volume for Coach has been 6.6 million shares per day over the past 30 days. Coach has a market cap of $9.6 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 1.25 and a short float of 9.6% with 5.49 days to cover. Shares are down 38% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Coach as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • COH's debt-to-equity ratio is very low at 0.06 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.31, which illustrates the ability to avoid short-term cash problems.
  • The gross profit margin for COACH INC is rather high; currently it is at 69.40%. Regardless of COH's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 6.62% trails the industry average.
  • COACH INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, COACH INC reported lower earnings of $2.78 versus $3.62 in the prior year. For the next year, the market is expecting a contraction of 31.6% in earnings ($1.90 versus $2.78).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Textiles, Apparel & Luxury Goods industry. The net income has significantly decreased by 66.0% when compared to the same quarter one year ago, falling from $221.34 million to $75.28 million.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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